The Amazingly Persistent Failure of Politics

As China announced its new wave of retaliatory tariffs against the United States’ trade sanctions, I am reminded of all the promises the administration made to us about the impact of its policies. There was the US President bragging about how “trade wars are good, and easy to win.”

Wrong.

There was also his top trade adviser Peter Navarro assuring Maria Bartiromo of the Fox Business Network that no countries would retaliate because the stakes are just too high.

Wrong again.

Six months into the trade war, pretty much all of the targeted countries have retaliated against Trump’s tariffs. Some, such as China, have even retaliated more than once. While there is no doubt that the tariffs on everything from steel and aluminum to washing machines have hurt some foreign producers, they have hurt American manufacturers and consumers the most. My colleague Christine McDaniel produced a map that shows the 32,443 requests for exemptions filed by American firms asking the Trump administration to stop hurting them with the import taxes. 

Since this trade war started, not only has no country lowered its tariffs as a result of the administration’s pressure, but many tariffs have actually gone up. Prices are up, too. Washing machine prices are up 16.4 percent. The price of steel has skyrocketed, making American steel even less competitive than it was before. Car prices are already rising thanks to the steel tariffs, too, but they could rise much more if the 25 percent tariffs on imported automobiles, SUVs, vans, trucks, and all auto parts becomes a reality.

And yet few of Mr. Trump’s supporters seem to hold the president and his team accountable for their failed promises. To be fair, such “forgiveness” is not unique to Trump supporters.

Remember president Obama’s “if you like your plan you can keep it” blunder? Remember the many other failed promises made by Mr. Obama about the impact of his signature health care bill? While millions of Americans lost their health-care plans and others faced stunningly higher premiums as a result of the legislation, Mr. Obama would then go on to win another term.

Going back further in time, there is the decision by the George W. Bush administration to go to war in Iraq based on the claim that Saddam Hussein had weapons of mass destruction. Two years into the invasion, the American people learned with absolute certainty that the claim was proven to be completely false. And do you remember President Bush’s “Mission Accomplished” speech on June 5, 2003? The speech was meant to declare the U.S. and its allies’ victory in the war in Iraq. Of course, there was no such victory, and many more lives would be lost (and continue to be lost to this day). Yet Bush was re-elected to a second term in November 2004.

Many, perhaps most, government programs fail to deliver on their promised goals. Here are a few examples: In spite of the large increase in government spending per student, over the last 40 years test scores have remained flat. 

The Securities and Exchange Commission claims to be necessary to avoid Bernard Madoff-type Ponzi schemes, yet that agency failed to investigate the actual Madoff scheme in spite of repeated warnings. The Energy Department’s 1705 loan program was supposed to back loans to companies having a hard time accessing credit, but 90 percent of the money went to well-funded and large companies. On the other hand, the companies like Solyndra and Abound Solar—which meet the advertised standard—defaulted, leaving taxpayers with a large bill.

I could go on and on. The bottom line is that politicians frequently make mistakes, big ones. They lie, too. And government fails. A lot.

This comes as no surprise to any of us who have studied public-choice economics, including the great work of Nobel Prize winner James Buchanan. Let me sum it up for you: No matter how good legislators’ intentions are, and no matter how much money government spends, government “solutions” are very likely to fall short of solving most of the problems they’re sold as solving. Indeed, often the result is disastrous.

Government fails to diminish the severity of most of the problems that it tackles because its incentives are such that it favors special-interest groups while ignoring the public interest. The problem isn’t that we have the wrong people in office; rather, it’s that the institutions of government are inherently incapable of performing certain tasks; in addition to being prone to cater to interest groups, government officials have too little of the information that’s necessary to regulate in ways that would result in good outcomes.

It’s too bad that more people don’t understand public-choice economics. Such widespread understanding would promote better policies. Being willing to acknowledge that government fails is important, but understanding why it does would go a long way toward preventing government from becoming responsible for tasks that it has no hope of carrying out in ways that truly further the public good.

That’s one problem. The other one is that in government there are no reliable mechanisms for correcting failures or for punishing those who are responsible for those failures. Elections— contrary to much public fantasy—aren’t a very good system for holding legislators accountable. To be sure, the failure of the war in Iraq probably played a role in the election of President Obama (a much more liberal Democrat than his Democratic predecessor Bill Clinton) and the Democrats winning both the Senate and the House in 2008. But because of the countless number of issues in play during any election, there’s no way for any elected official to be held accountable by voters for his or her actions on any one issue.

The market, on the other hand, while not perfect, is far better at implementing a goal and holding accountable those who fail to achieve that goal. Profits and losses are powerful engines that are much better than political institutions at aligning private actors’ incentives with the public interest. Think about how long it took for Coca-Cola to fall on its sword after the disastrous rollout of New Coke (hint: not long at all!). Think about how long the traditional model of travel agencies lasted after the creation of Expedia. Think about how long Blockbuster stores survived once many people adopted Netflix. And think about how much more comfortable your neighborhood movie theater is thanks to the consumers’ ability to watch large quantities of movies from their bed or living room.

What can we do then to hold government and politicians more accountable for their failed promises and policies? Not much, apart from restraining the scope of government. The less they’re allowed to do, the fewer opportunities they have to mess up. Now the question is: How do we convince people to roll back the size and scope of government, when we can’t even make them see how unaccountable politicians are in the first place?

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